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Passport Health, Inc., A Maryland Corporation v. Travel Med

September 6, 2011

PASSPORT HEALTH, INC., A MARYLAND CORPORATION, PLAINTIFF,
v.
TRAVEL MED, INC., A CALIFORNIA CORPORATION AND GINA FLAHARTY, AN INDIVIDUAL AND CITIZEN OF THE STATE OF CALIFORNIA *FN1 DEFENDANTS.



The opinion of the court was delivered by: Garland E. Burrell, Jr. United States District Judge

FINDINGS OF FACT AND CONCLUSIONS OF LAW

This decision decides the bench trial held on April 20, 2011, solely on the damages portion of Plaintiff Passport Health, Inc.'s ("Passport Health") claims. Before the bench trial, Passport Health moved for and was granted partial summary judgment on the liability portion of its following claims: breach of the Franchise Agreement, breach of the Guaranty, and Trademark Infringement alleged under 15 U.S.C. § 1114(1)(a).

I. FINDINGS OF FACT

A. BACKGROUND

1. The February 10, 2011 Order granting Passport Health partial summary judgment contains the following uncontroverted facts:

Plaintiff owns the trademark "PASSPORT HEALTH" and has registered this "trademark with the U.S. Patent and Trademark Office for travel-and health-care-related services[.]" (Plaintiff's Statement of Undisputed Facts ("SUF") ¶ 2.)

A. Franchise Agreement

Passport Health and Travel Med entered into a Franchise Agreement in August 2007. Id. ¶ 3. Under the Franchise Agreement, Passport Health granted Travel Med the right, and Travel Med assumed the obligation, to operate a Passport Health franchise in a designated area for ten years. Id. The Franchise Agreement's ten year term commenced in September 2007, upon the opening of Travel Med's franchise. Id. Travel Med made its last royalty payment to Passport Health in March 2009. Id. ¶ 11. "After Travel Med breached the Franchise Agreement by failing to make royalty payments to Passport Health, Travel Med unilaterally terminated the Franchise Agreement effective June 12, 2009." Id. ¶ 13. Passport Health "fully performed its obligations under the Franchise Agreement." Id. ¶ 17.

In exchange for the right to own and operate a Passport Health franchise and use the Passport Health trademark, Travel Med promised to pay royalties to Plaintiff for the ten year term of the Franchise Agreement. Id. ¶ 4. The Franchise Agreement does not provide Travel Med a right of early termination. Id. Travel Med agreed in the Franchise Agreement that Plaintiff owns the Passport Health trademark. Id. ¶ 5. The Franchise Agreement includes provisions concerning Travel Med's post-termination obligations; specifically, upon termination of the Franchise Agreement, Travel Med was required to stop representing to the public that it is or was affiliated with Plaintiff and to stop using the Passport Health trademark. Id. ¶ 6.

B. Guaranty

When Travel Med executed the Franchise Agreement, Flaharty personally executed a Guaranty, guaranteeing that in the event Travel Med defaulted on its obligations, Flaharty would personally perform Travel Med's obligations under the Franchise Agreement. (SUF ¶ 7.) Flaharty has not performed Travel Med's obligations under the Franchise Agreement. Id. ¶ 18.

C. Website

In September 2007, Defendants created a website for Travel Med at "www.passporthealthnca. com". (SUF ¶ 8.) "When Travel Med agreed to become a Passport Health Franchise, Travel Med was not provided with a URL to register by Passport Health. Instead, Travel Med was instructed to find something that was close to 'Passport Health' to register and to use as Travel Med's own website." (Separate Statement in Supp. of Defs.' Opposition ("SSS") ¶ 12.) "Pursuant to that instruction, Travel Med registered www.passporthealthnca.com as its own website on August 12 2007 and pre-paid for the registration for 4 years, ending in September 2011." Id."Even though Travel Med stopped making royalty payments to Passport Health in March 2009, Defendants admit that they used the PASSPORT HEALTH Trademarks through at least June 12, 2009." (SUF ¶ 12; SSS ¶ 15.) "[I]n preparation of ceasing to use Passport Health's name[,]" Defendants created a website for Travel Med at "www.travelmedinc.com". (SUF ¶ 9; SSS ¶ 12.) "Until at least July 20, 2010, Defendants' www.passporthealthnca.com website automatically redirected visitors to Defendants' www.travelmedinc.com website." (SUF ¶ 15.)

After Passport Health's attorneys expressed concern regarding Travel Med's URL www.passporthealth.com in the summer of 2010, Travel Med added the statement: "Due to ongoing litigation with Passport Health, the owner of this URL and website, Travel Med Inc., is unable to redirect you at this time. We regret any inconvenience this may cause you.["] Both "Passport Health" and "Travel Med. Inc." are hyper links that take any visitor to the respective websites of Passport Health and Travel Med. (SSS ¶ 13.)

2. Flaharty testified at trial that the only reason she terminated the Franchise Agreement was because of an event in the spring of 2009, which caused her to believe the CEO of Passport Health acted unethically when changing Travel Med's pharmaceutical account without Travel Med's approval. Flaharty also testified that this issue was ultimately rectified and Travel Med did not lose any money as a result of the matter.

B. GROSS REVENUES OF TRAVEL MED

3. Under the Franchise Agreement, Travel Med agreed to pay Passport Health monthly royalties in the amount of seven percent of Travel Med's gross revenues for the ten year term of the agreement. The ten year term would have concluded in August 2017. (Ex. 12.)

4. Travel Med's gross revenues from January 2008 through January 2011 are as follows:

MONTH GROSS REVENUES MONTH GROSS REVENUES

September 2007 $5,865.80 June 2009 $61,292.35 October 2007 $37,366.32 July 2009 $53,755.67 November 2007 $41,350.14 August 2009 $43,776.16 December 2007 $19,014.89 September 2009 $54,934.75 January 2008 $40,010.77 October 2009 $86,878.56 February 2008 $41,687.68 November 2009 $62,102.45 March 2008 $36,447.30 December 2009 $35,067.81 April 2008 $52,431.85 January 2010 $84,752.77 May 2008 $46,363.00 February 2010 $45,592.63 June 2008 $44,347.05 March 2010 $58,607.89 July 2008 $34,901.80 April 2010 $42,862.63 August 2008 $34,857.80 May 2010 $66,655.03 September 2008 $22,327.41 June 2010 $57,560.05 October 2008 $44,540.50 July 2010 $48,043.41 November 2008 $49,917.26 August 2010 $38,475.47 December 2008 $33,901.97 September 2010 $54,823.92 January 2009 $34,943.24 October 2010 $100,813.67 February 2009 $27,279.30 November 2010 $44,663.82 March 2009 $55,639.35 December 2010 $44,590.88 April 2009 $56,845.98 January 2011 $49,477.14 May 2009 $50,797.35 (Exs. 1-5.)

5. Travel Med did not produce records of its gross revenues for February and March 2011, even though Plaintiff requested the production of this information, and Flaharty testified she did not know and could not testify regarding the gross revenue for those months.

6. Flaharty also testified at trial that Travel Med's future business cannot be determined by its past gross revenue since many factors can impact the travel medicine business involved in this case, including the economic climate, the public's desire for ...


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